CAEAFTA Sales and Use Tax Exclusion
Revenue and Taxation Code Section 6010.8
California Revenue and Taxation Code (RTC) section 6010.8 provides an exclusion from sales and use tax for the purchase of tangible personal property by a “participating party” for eligible projects involving the following:
- Alternative energy sources
- Advanced transportation technologies
- Advanced manufacturing
- Recycled Feedstock
Persons who wish to obtain this exclusion must apply to the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA).
Senate Bill 71, enacted in 2010, amended the Public Resources Code (PRC) to allow the exclusion from sales and use tax for eligible projects that promote the utilization of “green technology.”
Senate Bill 1128, enacted in 2012, amended the PRC to allow the exclusion from sales and use tax for eligible projects that promote the utilization of “alternative manufacturing.”
Assembly Bill 199, enacted in 2015, amended the PRC to allow the exclusion from sales and use tax for eligible projects that promote the utilization of “recycled feedstock.”
This program is administered by the CAEATFA. Please visit CAEATFA’s website for information on:
- Application materials
- Application process
- SB 71, SB 1128 and AB 1128 regulations
- Other program information
For additional information, see:
- SB 71 Frequently Asked Questions (CAEATFA)
- BOE Special Notice – New Legislation to Affect Manufacturers of Green Technology
If CAEATFA has informed you that you qualify as a participating party, and the equipment you purchase is considered a “project,” you should issue your vendor an exemption certificate as described in Sales and Use Tax Regulation 1667, Exemption Certificates. The form should include your seller’s permit number, or if you are not required to hold one, a notation to that effect and the reason you do not need one. The form should also include a statement that the property will be purchased in a manner excluded from tax per Revenue and Taxation Code (RTC) section 6010.8.
Because this is a new program, you may find it helpful to inform your vendor of this program by attaching a copy of your Master Agreement with CAEATFA and a copy of BOE Special Notice – New Legislation to Affect Manufacturers of Green Technology to your exemption certificate. Providing such additional information will help your vendor understand that they can accept the exemption certificate in good faith.
Can I Purchase Equipment Prior to Being Approved by CAEATFA?
The Sales and Use Tax exclusion applies to any property that is considered a “project.” You are allowed to purchase your equipment in anticipation of approval by CAEATFA; however the following conditions apply:
- You will not be granted the exclusion until you are approved by CAEATFA.
- To qualify for the exclusion, it is necessary to be able to establish that there has been no functional use of the property or that the property has not otherwise been placed into service prior to being accepted as a participating party by CAEATFA. Functional use is defined as use for purposes for which the property was designed.
- If you plan to purchase equipment in anticipation of being approved by CAEATFA, and the equipment is not yet considered a “project,” you may not issue a valid exemption certificate because your project has not yet been approved by CAEATFA. Under such circumstances, you must pay tax on purchases you make prior to approval by CAEATFA, and you may not functionally use, or place in service, the equipment prior to being accepted as a participating party by CAEATFA.
- If you paid sales tax reimbursement or use tax on property that ultimately qualifies as a “project” and can establish with proper supporting documentation that the property has not been functionally used or placed in service prior to being accepted as a participating party by CAEATFA, you are entitled to a refund of tax once CAEATFA grants approval of your project.
How Do I Receive a Refund for Tax Already Paid?
- If the tax you paid is considered a use tax (typically use tax applies when you purchase from an out-of-state vendor), you may file a claim for refund directly with the Board of Equalization. Simply complete form BOE-101, Claim for Refund and Credit and mail it to the address provided. Include as the reason for the refund that the property was purchased for subsequent nontaxable transfer to CAEATFA under RTC section 6010.8.
- If the tax you paid is considered a sales tax (typically sales tax applies when you purchase from a California vendor), you must obtain a refund of tax directly from your vendor. An amount paid to the retailer by the purchaser itemized as sales tax is not imposed by the state on the purchaser. It is a tax imposed on the retailer. The purchaser, as a matter of contract, is merely reimbursing the retailer for the tax imposed on the retailer. Thus, the purchaser has no standing to file a claim for the refund with the BOE for such amounts since the purchaser made no payments of sales tax to the BOE. Instead, the retailer is the only person who may file a claim for refund of sales taxes. When a retailer receives a refund of excess tax reimbursement paid to the state, the retailer is obligated by law to return the excess tax reimbursement to the purchaser who paid it.